July 2013 | SME Advisor Magazine

Every business location basically serves two main functions: it gives you a physical ‘place' in relation to the rest of the world – in your city, town or community – and provides a ‘workspace' for you, the people you work with and any equipment, plant or machinery you may use.

Let's think about location first. One hundred years ago, the great hotelier Henry Hilton said that only three things matter: ‘location, location, and location'. Yet in today's cyber-dominated workspace, many people might take the view that location itself is no longer a prime factor in choosing an office: perhaps, the argument goes, location is irrelevant because you can start your company anywhere and reach employees and customers at any time of day via email, text, voice and video. Yet the latest research shows that nothing could be further from the truth – location is still fantastically important, especially with the smaller business or startup. Location matters tremendously because it determines whether your business has access to the resources needed to grow.

In a survey released only four weeks ago, the US management guru Peter S. Cohan found that there are in fact six key dynamics as to how location can play a major role in business development. The survey – 6 Ways Your Startup's Location Can Boost Your Bottom Line – highlighted the following benefits that a prime location can bring:

1. It's important to be near ‘pillar' companies.

A pillar company is publicly traded, provides capital and talent to startups and small firms and even buys their products. You have to ask whether there are businesses of this kind in the area you've selected, and – most importantly – whether the local talent pool will give you the skills you need. For example, if you're a technology business and you're near pillar companies like an Oracle or a Cisco, you're just a stone's throw from people with the experience your business needs.

2. Tap local universities for ideas and talent.

In order to build market share, you need to get the best ideas and talent. Locating your company near universities with precisely this kind of top talent will give you a powerful start – and a cluster of talented people willing to work on a part-time basis. Also, when these people graduate, they are tailor-made for your business.

3. Work where others share your values.

An entrepreneur's choice of where to locate often flows directly from where he or she wants to live. And that choice can depend on whether he or she shares the values of the local startup community. Are you going to find a sufficiently inspiring, diverse community in an industrial estate or suburban location, for example?

4. Move to where people want to live.

SMEs stand a better chance of attracting the best of the full range of talent if their location is an easy commute. This makes it easier for you to persuade potential staff to join you without changing their commuting patterns.

5. Stay close to investment capital.

Investors often like to be close to the businesses they invest in. That's why it can be helpful to locate near the offices of venture capitalists that specialise in your industry. Investors like to be able to share a meal with the SME's owner/directors or drop in to give a pep talk without the hassle of a long journey.

6. Be near your mentor.

If you need advice on how best to run your business, it's wise to be near a deep pool of mentors who can help you remove the impediments to growth. Again, these mentors are more likely to be based around the major hubs – and you won't want a long drive to reach them for quick advice when it's needed most.

The moral of the story is: it pays to be in a cosmopolitan, central setting where you'll find like-minded businesses and a rich pool of talent. In other words, be where the successful businesses are. Of course, this raises issues such as –

• Cost

• Availability

• Size and configuration of units

• Suitability for cabling and IT connections, etc.

It's truism that these same issues will appear and re-appear throughout the life of the business and not only in relation to whether or not it moves to a prestige, central location. As the business grows and changes it will continually confront these same constraints of price and availability. We can say, in fact, that these are core issues surrounding the quest for a suitable ‘workspace' for you and the people you work with.

The office you have is central to the way you work

The Federation of Small Businesses (FSB) is the world's largest SME network, with more than 200,000 active members. UK-based, it has frequently conducted surveys on the role of the office environment and its impact on the life of a growing business. SME Advisor spoke to Peter Groves, the FSB's Head of Commercial Liaison. Peter commented that: “The interesting factor to emerge is that whenever a business encounters ‘pressure points' in the course of its trading history, the premises that the business works in always become a primary concern. For example, when an SME is ‘ticking over', our surveys show that the top concerns of business owners are (in this order) –

1. Trade credit arrangements

2. Cashflow

3. Staff competence in key roles

4. Market conditions

5. Cost and scale of premises

However, when a business is entering a ‘pressure point' – either raising finance for growth, entering a new market, or downscaling as a result of financial pressure, the role of the premises goes to the top of the list, eg –

1. Cost and scale of premises

2. Cashflow

3. Trade credit arrangements

4. Market conditions

5. Staff competence in key roles

Time and again, we see that the role of the business premises is incredibly important. When a business wants to grow, the premises is a challenge because you need to find more space at an affordable price and with the right configuration. When a business is struggling, the overheads associated with an inappropriate premises can kill it completely.”

The role of the ‘serviced office'

Peter Groves' comments emphasise the importance of flexible working options when it comes to business premises. The ability to move quickly and seamlessly isn't just a feature on everyone's Disaster Recovery Plans – it's an economic necessity. Does this mean, then, that a Serviced Office – which of course you won't have to furnish and fit out and which will have preferential contractual terms – is a good option?

On the face of things, it has obvious advantages. Firstly, it can facilitate your move to a prestige central location, because the serviced office provider – not you – has paid all the big, up-front development or rental costs.

Secondly, it means that you have a very good chance of finding a close match for your needs, whether in terms of bigger, better space, office configuration or IT compatibility. To see how a serviced provider itself sees the benefits, we spoke to the acknowledged world leader, Servcorp. A global business, Servcorp believes a serviced office has the following advantages -

• It's fully furnished and equipped.

• You'll have an unbranded reception area, where your business comes first (Note: this overcomes one of the traditional objections to serviced offices, where in the old, branded style of reception, your business could be perceived as ‘guesting' in a serviced block – with all the temporary and fragile implications that might bring).

• Superfast internet connection monitored 24/7.

• Cisco IP phone supported by a global network.

• Dedicated receptionist managing all your calls to your serviced office.

• On-hand support team.

• Fully-equipped meeting facilities and AV equipment.

• Flexible leases, no long-term contracts.

It's worth pointing out, too, that a company with the scale of Servcorp can provide a choice of the most central locations. Yet how important have these factors been in practice, when it comes to delivering on the all-important day-to-day needs of SMEs? For example, do SMEs take the view that a premium location is in fact a priority? What's more, do the options that Servcorp provides tick all the right boxes?

Let's ask the experts – the SMEs themselves!

SME Advisor spoke to Dubai-based SME, TSS Capital. The company takes the view that: “Of course, having a prime location is crucial for our business; selecting the right location can build your business in the right way. It's one of the factors that we look for, alongside having good service and a professional receptionist.” Similarly, another SME, Virtual Human Resources, agrees, saying: “Yes, a prime location is important, alongside other factors such as good IT, good communication, space, workable equipment, and facilities like a coffee machine.”

Does Servcorp deliver against these needs? Abu Dhabi-based Northern Trust is in no doubt: “It's important to be in a building and location with a good reputation, as it positively enhances the perception, and reflects the quality, of our brand. Servcorp's locations in Abu Dhabi, Dubai and Riyadh meet our high expectations in this regard. We also look for knowledgeable staff with a service mentality, good office furniture and a clean and organised office environment. We have all these with Servcorp.”

What about whether or not the Serviced office environment has played a helpful role during key times in the business' growth and transition? Has it, for example, helped conserve resources and facilitated ‘bridge-building' from one income level to the next? TSS Capital's views were very frank on this: “It's not a permanent solution but it definitely does help. The good thing is that if you're in a time of crisis, when people know you're with Servcorp, you have a power asset to help you continue and grow… We do plan to expand, but we look to continue for one more year because it does save money, even though the price has gone up recently, and we're happy to be here.” Virtual Human Resources add that: “We're at a critical stage at the moment. We can either grow or shrink at this stage. Our intention is to grow to 10 people in two years' time.”

TSS Capital definitely see the relationship with Servcorp as having leveraged their rapid development. For example, when asked if working with Servcorp had been a catalyst to the business' growth, professionalism and the level of staff satisfaction, the reply was that: “Yes, indeed, because of the reputation they have and the level of professionalism the team has to offer. We were originally located with a different service provider elsewhere, and the level of staff did not compare.”

Going head-to-head: who wins?

Has working with a leading Serviced Office provider saved time and money over and above conventional office solutions? For Virtual Human Resources, for example, traditional arrangements proved slow and frustrating: “Previously, setting up DEWA, IT, du has been really time consuming.” This view is echoed by TSS Capital when they say that (a serviced office): “Definitely saved time and expense because we don't have to think about hiring extra people.” By contrast, they now enjoy: “Good service, very good reception, professional people, and everyone is a call away – which is great.”

It's noticeable that throughout the above comments, there's a high premium on the role of the serviced office helping a business at a crucial stage in its development – at the very time when the company's focus is turned to issues such as the cost and availability of office space. Moreover, a prestigious, central location is paramount and this has been delivered by the choice of serviced offices. Serviced offices score highly, then, against the criteria defined by both Peter S. Cohan and the Federation of Small Businesses.

Clearly, there will always be companies who prefer to fit and furnish an office themselves and feel a greater sense of ‘ownership' with privately-rented (or purpose-built) office space. The fact remains, however, that in terms of the trends influencing today's SME marketplace, the serviced office can be a highly effective tool for maximising presence and market positioning while reining in an all-too-familiar tight budget and preparing for the next stage of development.

One last point…

What advice do the SMEs we spoke to have for the owners/directors of other businesses looking for new premises? Virtual Human Resources recommend that they look for: “Growth capability – find a space that you can grow into. Cost-effective and with a good location. Check on systems reliability, otherwise this can cause your business to fail; and general support is also vital.” Meanwhile, Northern Trust believe that: “The key criteria include flexible office space, both in quantity and adapting the space to requirements, knowledgeable staff with a service mentality, a good working environment and a convenient location with a good reputation.”

So – where will your business go to next?

Source: SME Advisor Magazine - June 2013 Issue